GS 3: Economy

Why in News?

World Bank has released the report “Global Economic Prospects: Heightened Tensions, Subdued Investment”. Global Economic Prospects is a biannual report, last one was published in January 2019.

Highlights:

• World Bank has downgraded global growth prospects by 0.3% to 2.6% for the 2019-20.
• The cause for down grade is weaker-than- expected international trade and investment at the start of 2019.
• Risks to global growth include rising trade barriers, a build-up of government debt and slowdowns in several major economies.
• WB has estimated that economies will begin improving here after and growth might touch 2.8% in 2021.
• Advanced economies as a group are expected to slow down in 2019, particularly the Euro Area, due to weaker investments and exports.
• U.S. growth is expected to slow to 2.5% this year, down from an estimated 2.9% in 2018, and then down to 1.7% and 1.6% in 2020 and 2021 respectively.
• U.S. policy uncertainty is expected to erode growth and investment as protectionist measures impact a wide range of downstream industries and trading partners due to the existence of global value chains.
• A no-deal Brexit could have a severe impact on the U.K. and to a lower extent on its European trading partners in the event of disruptions and delays at the border.

India’s findings:

The World Bank has retained its forecast for growth in India at 7.5% in the 2019-20 fiscal and the succeeding years. Report has warned that re-escalation of India-Pakistan tensions such as the one in February could increase uncertainty and impact investments in the region. Private consumption and investment will benefit from strengthening credit growth amid more accommodative monetary policy, with inflation having fallen below the Reserve Bank of India’s target. It further stated that the Goods and Services Tax (GST) regime is still in the process of being fully established, creating some uncertainty about projections of government revenues